A study on the impact of disposal of privatized public assets on the community : the case of Link REIT

Abstract

This dissertation attempts to study the impact of disposal of privatized public assets on the community, with reference to Link REIT's asset disposal to private investors in the past three years. The hypothesis of this study is that the disposal of the privatized public assets by Link REIT has more benefits than damages to the community.

Two shopping centres, Tin Ma Commercial Centre in Wong Tai Sin and Tsui Lam Square in Tseung Kwan O, were investigated in this study with detailed analysis based on interviews with independent retailers and focus group discussions with shoppers aiming to understand the impacts of the disposal on the community. An in-depth interview with the senior management of Link REIT was conducted to look into Link REIT's view on the disposal from his perspective.

The result of this study rejects the hypothesis. Disposal of the privatized public assets by Link REIT could open up opportunity for the new owner to perform asset enhancement to the disposed of assets as the large scale of Link REIT's portfolio limited its resources for enhancement of all of its properties. The upgraded environment of the enhanced assets could therefore benefit the tenants and the shoppers.

However, the result of this study shows that the disposal has more negative than positive impacts on the community. It could be explained by the lack of experience in managing those privatized public assets of the new owners. The negative effects are intensified because of inadequate communication between the new owners and the communities, and the new owners overlooking that shoppers of different age groups have varying needs.

The privatized public assets from the Hong Kong Housing Authority are special because the neighbourhood population of the privatized assets is largely composed of public housing tenants who are less mobile than private renters or owners and have lower income. Hence, the disposal is more influential to the public housing tenants than other shoppers. On the other hand, tenants could relocate their businesses if the business environment has gone too bad and are more flexible in coping with the disposal.

With its broad experience in managing those privatized public assets, it is suggested that Link REIT should coordinate with the new owners in bridging the transitional operation of the properties in future to mitigate the negative impacts of the disposal on the community. Furthermore, Link REIT should consider adopting an asset-light strategy in the future, that is to continue managing the disposed of shopping centres for the new owners under management contracts, subject to suitable amendment to the legislation of a REIT.

To safeguard the interest of the society in general, particularly the low income families of public rental housing, the Government should consider maintaining a controlling stake in the privatized asset in the future. It could ensure a better balance between the interests of the public and the private sector in the privatized public assets.